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In the Cabinet of Ministers meeting on January 23 of this year, the draft law on the Support for Innovative Business and Priority Projects developed by the Ministry of Economics was approved. The aim of this legislation is to increase export-oriented investments and create a regulatory environment favorable for testing and verifying new, innovative products, technologies, and services, thereby enhancing the competitiveness of the economy. The draft law also specifies priority project areas and provides the opportunity to implement support measures for promoting business and export capabilities.
In the context of the draft law, a priority project is defined as an investment attraction or export-promoting project that contributes to achieving goals set in development planning documents, national industrial policies, or digital transformation policies. These goals may include productivity growth, innovation development and commercialization, increase in export turnover, attracting strategically important large investment projects for the economy, and addressing market imperfections hindering the effective achievement of these objectives.
The new regulation will provide a strong incentive for expanding the range of Latvian export projects, allowing the application of the "green corridor" principle to exporting companies when investments in the respective project exceed 5 million euros. Until now, the "green corridor" was applicable only to large foreign investment projects. Additionally, the draft law includes the principles and conditions of regulatory sandboxes, representing the first step towards the real implementation of this special favorable regime for research and innovation projects.
The draft law specifies the following priority project areas:
- Five smart specialization areas* and net-zero emission technologies in Latvia.
- International business service centers.
- Tourism and events, such as landmarks.
- Projects promoting productivity growth, where the average employee salary is not less than the EU average salary in the previous reporting year.
- Construction, transport, or logistics (if investments are related to service and infrastructure provision in smart specialization areas).
- Construction of affordable rental and social housing.
- Security and defense.
The draft law also delegates to the Cabinet of Ministers the issuance of regulations by December 2024, which will define the procedures for serving priority projects ("green corridor"). These regulations are expected to include project qualification criteria, submission and evaluation procedures, implementation and monitoring procedures, conditions for granting and losing priority project status, etc.
To foster innovation development and market implementation, it is necessary to create an environment for innovation developers, allowing them to test new products, technologies, or services without hindrance, possibly reducing administrative burden and streamlining the coordination process. For this purpose, the draft law includes conditions for establishing regulatory sandboxes. Additionally, the draft law delegates to the Cabinet of Ministers the issuance of regulations by the end of 2024 on the establishment, implementation, monitoring, and termination conditions and procedures for regulatory sandboxes. In the context of the draft law, a regulatory sandbox is a specific legal framework within a limited territory, where different conditions apply than those in existing regulatory acts, allowing businesses and scientific institutions to test and verify innovative products, technologies, and services for commercialization.
For more detailed information on the draft law on Support for Innovative Business and Priority Projects, you can refer to the Legislative portal.
The current regulation for priority investment projects is based on the "Law on Overcoming the Consequences of the Spread of Covid-19" from June 10, 2020, and is included in the Cabinet of Ministers Regulation No. 83 of February 4, 2021, "Regulations on the Servicing of Priority Investment Projects." The existing "green corridor" regulation stipulates procedures and services to be provided in priority order and term, reducing the expected processing time by at least 50%. Since March 1, 2021 (start of submission acceptance), priority investment project status has been granted to 25 investment projects with a total contribution of more than 308 million euros and over 1150 created jobs.
*The five RIS3 (Research and Innovation Strategy for Smart Specialization) areas defined in Latvia, reinforced in the National Industrial Policy Guidelines for 2021-2027: (a) Knowledge-intensive bioeconomy; (b) Biomedicine, medical technologies, pharmacy; (c) Photonics and smart materials, technologies, and engineering systems; (d) Smart energy and mobility; (e) Information and communication technologies.
Ministry of economics
Public Relations Department